Administrative Code

Virginia Administrative Code
Title 14. Insurance
Agency 5. State Corporation Commission, Bureau of Insurance
1/27/2020

Chapter 360. Rules Governing Local Government Group Self-Insurance Pools

14VAC5-360-10. Purpose.

The purpose of this chapter is to set forth rules, forms and procedural requirements that the commission deems necessary for the approval and monitoring of pools created pursuant to Local Government Group Self-Insurance Pools, Chapter 27 (§ 15.2-2700 et seq.) of Title 15.2 of the Code of Virginia.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Regulation 30, Case No. INS870057, § 2, eff. September 1, 1987; amended, Virginia Register Volume 26, Issue 14, eff. March 1, 2010.

14VAC5-360-20. Definitions.

"Act" means Chapter 27 (§ 15.2-2700 et seq.) of Title 15.2 of the Code of Virginia.

"Actuary," for coverages other than group life, accident and health, means a person who is a member of the American Academy of Actuaries qualified in loss reserves and rate making according to professional guides, recommendations, interpretations, and opinions of the Academy, or a member of the Casualty Actuarial Society. For group life, accident and health coverages, "actuary," means a person who is a member of the American Academy of Actuaries qualified in group life, accident and health reserves or a fellow of the Society of Actuaries.

"Administrator" means the individual, partnership, corporation or other entity authorized to serve as a representative of a pool and its members in carrying out the policies of the board and managing the pool's activities.

"Commission" means the State Corporation Commission.

"Contribution" means the amount of payments required of each member in order to fund the pool's obligations under the plan.

"Group self-insurance pool" or "pool" means a pool organized by two or more political subdivisions for the purpose of forming a group self-insurance pool to provide for joint or cooperative action relative to their financial and administrative resources for the purpose of providing to the participating political subdivisions risk management and liability insurance coverage for pool members and employees of pool members for acts or omissions arising out of the scope of their employment, including any or all of the following:

1. Casualty insurance, including workers' compensation under the Virginia Workers' Compensation Act (§ 65.2-100 et seq. of the Code of Virginia), employers' liability, general, professional and public officials liability coverage;

2. Property insurance, including marine insurance and inland marine and transportation insurance coverage;

3. Group life, accident and health coverages including hospital, medical, surgical and dental benefits to the employees of member political subdivisions and their dependents;

4. Automobile insurance, including motor vehicle liability insurance coverage and collision and security for motor vehicles owned or operated, as required by Title 46.2 of the Code of Virginia, and protection against other liability and loss associated with the ownership and use of motor vehicles;

5. Surety and fidelity insurance coverage; and

6. Umbrella and excess insurance coverages.

"Insolvent" means (i) the condition of a pool that has liabilities in excess of assets or (ii) the inability of a pool to pay its obligations as they become due in the usual course of business.

"Member" means a political subdivision which has entered into a member agreement and thereby becomes a member in a group self-insurance pool.

"Member agreement" means the written agreement executed between each member and the pool which sets forth the conditions of membership in the pool, the obligations, if any, of each member to the other members and the terms, coverages, limits, and deductibles of the plan.

"Members' supervisory board" or "board" means the governing authority of the pool selected by the members to be responsible for fixing contributions to the pool, maintaining reserves, levying and collecting assessments for deficiencies, disposing of surpluses, and administration of the pool in the event of termination or insolvency.

"Plan" means the plan of self-insurance offered by the pool to its members as specifically designated in the member agreement.

"Political subdivision" means any county, city, or town, school board, transportation district commission, or any other local governmental authority or local agency or public service corporation owned, operated or controlled by a locality or local government authority, with power to enter into contractual undertakings.

"Service agent" means any individual, partnership, corporation or other entity that may provide any or all of the insurance services including, but not limited to, claims adjustment, safety engineering, compilation of statistics, the preparation of contribution payments, loss reports, and other required self-insurance reports, and the administration of a claims fund.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Regulation 30, Case No. INS870057, § 3, eff. September 1, 1987; amended, Virginia Register Volume 26, Issue 14, eff. March 1, 2010.

14VAC5-360-30. Application for license as group self-insurance pool; requirements; approval; review.

A. Two or more political subdivisions may be licensed by the commission as a group self-insurance pool for the purpose of entering into agreements to pool their liabilities under the Act. The application for a license shall be made on a form prescribed by the commission and shall contain answers to all questions and shall be verified by the oath or affidavit of at least one member of the board of the pool, and the administrator.

B. The commission may disapprove an application for the formation of a group self-insurance pool and may suspend or withdraw approval whenever it finds that applicant or pool:

1. Has refused to submit its books, papers, accounts, or affairs to the reasonable inspection of the commission or its representative;

2. Has refused, or its officers or agents have refused, to furnish satisfactory evidence of its financial and business standing or solvency;

3. Is insolvent, or is in such condition that its further transaction of business in this Commonwealth is hazardous to its members and creditors in this Commonwealth, and to the public;

4. Has refused or neglected to pay a valid final judgment against it within 60 days after its rendition;

5. Has violated any law of this Commonwealth or has violated or exceeded the powers granted by its members;

6. Has failed to pay any fees, taxes or charges imposed in this Commonwealth within 60 days after they are due and payable, or within 60 days after final disposition of any legal contest with respect to liability therefor; or

7. Has been found insolvent by a court of any other state, or by the insurance commissioner or other proper officer or agency of any other state, and has been prohibited from doing business in such state.

C. If after review of the pool's application and other additional information required by this chapter, the commission is satisfied that the pool's financial condition and method of operation are such that the pool may reasonably be expected to meet the obligations which it has undertaken, and has fully disclosed to its members or potential members the coverages and obligations of membership in the plan, then the commission shall issue a license to the pool. The commission shall act on the application as promptly as practical under the existing circumstances.

D. If the commission rejects the pool's application, notice shall be served personally, or by certified or registered mail, upon all interested parties stating the reason for the rejection. The pool shall be provided an opportunity to introduce evidence and be heard in a hearing convened within a timely manner. Such hearing may be formal or informal.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Regulation 30, Case No. INS870057, § 4, eff. September 1, 1987; amended, Virginia Register Volume 26, Issue 14, eff. March 1, 2010.

14VAC5-360-40. Application for license; additional requirements.

A. An application submitted by a pool shall be accompanied by the following items which shall be subject to the approval of the commission:

1. A copy of the articles of incorporation, constitution, or other instrument which sets forth the powers of the pool.

2. A copy of the bylaws or the governing rules of the proposed pool which may be included as part of the documents provided pursuant to subdivision 1 of this subsection.

3. A copy of the forms used for the member agreement and power of attorney, if any.

4. A copy of the forms used for the indemnity agreement and power of attorney, if any.

5. A copy of a financial plan which sets forth in general terms:

a. The insurance coverages to be offered by the group self-insurance pool, applicable deductible levels, and the maximum liability which the pool will retain;

b. The amount of reserves to be set aside for the payment of claims;

c. The amount, if any, of specific excess insurance to be purchased by the pool; and

d. The amount, if any, of aggregate excess insurance coverage to be purchased and maintained.

Such items may be contained in other documents submitted to the commission in lieu of inclusion in a financial plan.

6. A copy of a plan of management which provides for all of the following:

a. The means of establishing the governing authority of the pool;

b. The responsibility of the governing authority for fixing contributions to the pool, maintaining reserves, levying and collecting assessments for deficiencies, disposing of surpluses, and administration of the pool in the event of termination or insolvency;

c. The basis upon which new members may be admitted to, and existing members may leave, the pool;

d. The identification of reserves by exposure areas; and

e. Such other provisions as are necessary or desirable for the operation of the pool.

Such items may be contained in other documents in lieu of inclusion in a plan of management.

7. Designation of the initial or interim board and the administrator, together with pertinent biographical information for each member of the board and for the administrator or the principal officers of the corporation serving as administrator. This information is to be submitted on a form prescribed by the commission.

8. The address in this Commonwealth where the books and records of the pool will be maintained at all times.

9. Information showing that the pool has, within its own organization or by contract with an approved service agent, ample facilities and competent personnel to service its program with respect to underwriting matters, compilation of statistics, loss prevention, safety engineering and claims adjusting. Copies of all executed service agreements shall be filed with the commission.

10. A confirmation of a fidelity bond covering the administrator and its employees in a form and amount acceptable to the commission.

11. A projection of administrative expenses for the first year of operation in an amount and as a percentage of the estimated annual contributions.

12. Proof of payment of contributions by members of at least 25% of its estimated first year's contribution into a designated depository. This amount shall not be less than $250,000.

13. The application shall be accompanied by any other information the commission requires.

B. An application submitted by a group self-insurance pool shall be accompanied by a composite listing of the estimated annual gross contributions to be developed by each organizing member of the pool individually and in the aggregate for the pool. The aggregate amount of annual contributions must be at least $ 1 million unless otherwise approved by the commission.

C. Any subsequent revisions to items submitted under the provisions of 14VAC5-360-30 and 14VAC5-360-40 shall be filed with and subject to approval by the commission.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Regulation 30, Case No. INS870057, § 5, eff. September 1, 1987; amended, Virginia Register Volume 26, Issue 14, eff. March 1, 2010.

14VAC5-360-45. Security deposit requirement.

Each pool licensed by the commission to offer workers compensation shall maintain with the State Treasurer a security deposit of acceptable securities in an amount of $250,000 for the first plan year, or such other amount as the commission prescribes, and for succeeding plan years such amount as the commission deems reasonable taking into account the financial condition of the association and any excess insurance carried by the association. The commission may, from time to time, increase, release, or reduce the security deposit or surety bond requirement. The security deposit shall be subject to the provisions of Article 7 (§ 38.2-1045 et seq.) of Chapter 10 of Title 38.2 of the Code of Virginia.

For the purposes of this chapter, acceptable securities shall be (i) investments allowed by § 2.2-4500 of the Code of Virginia (legal investments for public sinking funds) and § 2.2-4501 of the Code of Virginia (legal investments for other public funds); (ii) securities issued by states, other than Virginia, and their municipalities or political subdivisions rated A or better by Moody's Investors Services, Inc., or Standard and Poor's, Inc.; (iii) revenue bonds rated Aa (AA) or better by Moody's Investors Services, Inc., or Standard and Poor's, Inc. that are bonds issued by municipalities or political subdivisions of this Commonwealth or any other state; (iv) securities issued by the Federal Home Loan Banks; and (v) securities issued by the Federal Intermediate Credit Banks.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 26, Issue 14, eff. March 1, 2010.

14VAC5-360-50. Investments.

The board of a pool may, in its discretion, invest funds in any type of investments authorized by §§ 38.2-1415, 38.2-1418, 38.2-1419, 38.2-1421, and 38.2-1432 of the Code of Virginia. Investments may also include (i) investments allowed by § 2.2-4500 of the Code of Virginia (legal investments for public sinking funds) and § 2.2-4501 of the Code of Virginia (legal investments for other public funds), (ii) securities issued by states, other than Virginia, and their municipalities or political subdivisions rated A or better by Moody's Investors Services, Inc., or Standard and Poor's, Inc., (iii) revenue bonds rated Aa (AA) or better by Moody's Investors Services, Inc., or Standard and Poor's, Inc. that are bonds issued by municipalities or political subdivisions of this Commonwealth or any other state, (iv) securities issued by the Federal Home Loan Banks, and (v) securities issued by the Federal Intermediate Credit Banks. Other investments may be made subject to the approval of the commission. All such investments shall be authorized or approved by the board in the manner contemplated by the provisions of § 38.2-1408 of the Code of Virginia.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Regulation 30, Case No. INS870057, § 6, eff. September 1, 1987; amended, Virginia Register Volume 26, Issue 14, eff. March 1, 2010.

14VAC5-360-60. Filing of reports; examination by commission.

A. Each pool shall file annually with the commission and with the members of the pool within six months after the end of the pool's fiscal year, audited financial reports for the most recently completed fiscal year certified by an independent certified public accountant. The financial report shall be considered filed on the date the report was sent by mail as shown by the postmark. If the pool fails to file such audited financial reports, the commission may perform the audit and the pool shall reimburse the commission for such cost.

1. The audited financial report shall contain a report in detail of the pool's assets, outstanding liabilities, including the amount of claims paid to date and current reserves for losses, revenues and disbursements during the year, the investments of the pool's assets and all other information which the commission may deem necessary to secure a full and accurate knowledge of the financial affairs and condition of the pool. The working papers of the certified public accountant and other records pertaining to the preparation of the audited financial reports may be reviewed by the commission.

2. The audited financial report shall be signed on behalf of the pool by two duly authorized officers or a duly authorized officer and the administrator.

3. The commission shall also devise a uniform accounting system to be used by the pool.

4. In addition to the annual audited financial report, the commission may require any pool to file additional financial information, including interim financial reports and additional reports, exhibits or statements considered necessary to secure complete information concerning the condition, solvency, experience, transactions or affairs of the pool. The commission shall establish reasonable deadlines for filing these additional reports, exhibits or statements and may require verification as the commission shall designate.

B. The pool must retain and have available for examination by the commission:

1. All executed copies of the application of each political subdivision for membership in the pool; and

2. A certified copy of each political subdivision's resolution authorizing membership in the pool.

C. Any person who knowingly or willfully makes or files any false or fraudulent statement, report or other instrument shall be charged with a Class 5 felony. If convicted, such person shall be guilty of a Class 5 felony.

D. The commission may examine the affairs, transactions, accounts, records, and assets of the pool as often as it deems necessary. The manner and frequency in which the examination of financial condition shall be conducted and the release of any reports of financial condition shall be as provided in Article 4 (§ 38.2-1317 et seq.) of Chapter 13 of Title 38.2 of the Code of Virginia.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Regulation 30, Case No. INS870057, § 6, eff. September 1, 1987; amended, Virginia Register Volume 26, Issue 14, eff. March 1, 2010.

14VAC5-360-70. Reserves.

A. Every pool shall calculate the amount reasonably determined to be sufficient to provide for the payment of every loss or claim whether reported or unreported, arising on or prior to the date of any annual or other report and it shall maintain a reserve liability in an amount estimated in the aggregate to provide for the payment of all such losses or claims and any expenses related thereto.

B. Each pool shall maintain reserves equal to the unearned portion of the gross contribution or assessment, if any, on unexpired or unterminated risks.

C. Reserves for coverages based on life expectancy shall be computed according to tables of mortality and rates of interest prescribed in Title 38.2 of the Code of Virginia. The pool shall maintain an active life reserve for accident and health coverages which shall place a sound value on its liabilities under such risks and shall not be less in the aggregate than the pro rata gross unearned contributions for such coverages.

D. Every pool may receive credit for insurance or reinsurance recoverable from an insurance company licensed to transact such insurance in this Commonwealth, or any state of the United States or the District of Columbia and meeting the standards of solvency at least equal to those required in this Commonwealth. A pool may receive credit for insurance or reinsurance with any other insurer to the extent that funds are withheld as security for the payment of obligations thereunder if such funds are held subject to withdrawal by and are under the control of the pool. Such funds may include letters of credit subject to the approval of the commission. Credit may be received for insurance or reinsurance recoverable on the basis of an agreement entered into with individual unincorporated underwriters having a trusteed surplus of at least $100,000,000.

E. Credit may be received for insurance or reinsurance when the contract is:

1. Not cancellable or terminable for any reason except upon not less than 60 days written notice sent by registered or certified mail to (i) the pool and (ii) the commission;

2. Automatically renewable at the expiration of the policy period except upon 60 days written notice sent by registered or certified mail to (i) the pool, and (ii) the commission.

F. No more than one pool, which shall be defined as the named insured, shall be covered by any contract or policy of excess liability insurance. Any contract of insurance or reinsurance shall be payable by the assuming insurer on the basis of the liability of the pool under the contract or contracts assumed without diminution because of the insolvency of the pool.

G. Copies of the complete contracts or policies of insurance or reinsurance, with all endorsements thereto entered into by the pool for the benefit of the pool, shall be filed with the commission.

H. No pool shall expose itself to any loss on any one risk or hazard in an amount exceeding 10% of the aggregate annual contribution, unless authorized by the commission.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Regulation 30, Case No. INS870057, § 6, eff. September 1, 1987; amended, Virginia Register Volume 26, Issue 14, eff. March 1, 2010.

14VAC5-360-80. Responsibilities of members' supervisory board.

A. The members' supervisory board shall be responsible for holding and managing the assets of and directing the affairs of the pool and shall be elected in the manner prescribed by the pool's governing instruments. At least a majority of the board shall be members of the pool, but a board member shall not be an owner, officer or employee of any service agent, its parent or any of its affiliated companies, under contract with the pool.

B. The board shall fix contributions to the pool and supervise the finances of the pool and the pool's operations to the extent necessary to assure conformity with law, this chapter, the member agreement, and the pool's governing instruments.

C. The board shall take all necessary precautions to safeguard the assets of the pool, including, but not limited to, the following:

1. Doing all acts necessary to assure that each member continues to be able to fulfill the obligations of membership; and also reporting promptly to the commission any grounds or change in circumstances which may affect the pool's ability to meet its obligations such as withdrawal of a member;

2. Designating an administrator to administer the affairs of the pool, to carry out the policies established by the board and to provide day to day management of the pool. The administrator shall furnish a fidelity bond in an amount sufficient to protect the pool against the misappropriation or misuse of any monies or securities. Evidence of the bond shall be filed with the commission, said bond being one of the conditions required for licensing of the pool. The administrator shall not be an owner, officer or employee of any service agent, its parent or any of its affiliated companies, any of which are under contract with the pool;

3. Retaining control of all monies collected for the pool and the disbursement of such monies by the pool. All assets of the pool shall remain in the custody of the board or the authorized administrator. However, a claims fund for payment of benefits due and other related expenses may be established for the use of any authorized service agent; and

4. Actively collecting delinquent accounts resulting from any past due contributions by members. Any member of a pool who fails to make the required contributions after due notice may be declared ineligible for the self-insurance privilege until this past due account, including cost of collection, has been paid or adequately provided for.

D. The board shall assure that, for workers' compensation liability, payroll verifications of all members of the pools are completed within 180 days after the close of a plan year and the board shall require that efforts are made to collect any additional amounts due within 30 days of the completion of each audit.

E. Neither the board nor the administrator shall use any of the monies collected for any purpose unrelated to securing the members' liability or other rights and obligations under the member agreement and any administrative or other necessary expenses of the pool. Further, the board shall be prohibited from borrowing any monies from the pool or in the name of the pool without advising the commission of the nature and purpose of the loan and obtaining the commission's approval.

F. The board may dispose of any surplus as provided in 14VAC5-360-100.

G. The board shall assure that the office of the administrator of the pool and all pertinent records necessary to verify the accuracy and completeness of all reports submitted to the commission are maintained within this Commonwealth.

H. The board may adopt its own rules and procedures as considered necessary for the operation of the pool provided these rules and procedures are not inconsistent with the Act and this chapter.

I. The board may designate a service agent or agents.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Regulation 30, Case No. INS870057, § 6, eff. September 1, 1987; amended, Virginia Register Volume 26, Issue 14, eff. March 1, 2010.

14VAC5-360-90. Contribution requirements.

A. For the purpose of funding the liability of a pool the members shall make contributions to the pool in the manner prescribed in the member agreement.

B. For the purpose of funding the workers' compensation liability of a pool, the members shall make contributions to the pool based on annual payrolls for all employees of each member using rates and stock or nonstock discounts as adopted by the board and approved by the commission. The rates to be used are those in effect as of the inception of each pool's fiscal year. A plan that allows for consideration of past experience in developing a factor to be applied to a member's contribution may be used provided this plan has been approved by the commission.

Nothing contained herein shall be construed to prevent a pool from filing with the commission its own rates or a deviation from these rates or an alternative method of determining contributions that may be used upon approval by the commission.

C. At the effective date of a pool's license, $250,000 shall have been paid into a designated depository. The balance of the first year's contributions shall be paid no later than the end of the ninth month of the pool's fiscal year, either in quarterly or monthly installments at the discretion of the board. For each subsequent year of operation of the pool, the payment schedule shall provide for annual or periodic payments in intervals no more frequently than once a month, at the discretion of the board.

D. Each pool shall file with the commission the basis for establishing the annual contributions of its members. Such contributions must be based on reasonable assumptions and certified by an actuary or other person satisfactory to the commission as to the sufficiency of such contributions. This subsection shall not apply to a pool's workers' compensation business.

E. The total amount of each member's annual contribution to the pool shall be certified by the board to the governing body of each member at least one month prior to the beginning of the next fiscal year, if practical.

F. Each pool may levy upon its members an additional assessment whenever needed to supplement the pool's surplus to assure payment of its obligations. A member may be assessed for any fiscal year during which the member participated in the pool. Such assessment may be made after the end of the pool's fiscal year and after the member has discontinued membership in the pool.

1. The pool may assess each participating member an additional proportionate amount, as provided in the pool's member agreement or as provided in the pool's plan filed with the commission to correct a deficit condition.

2. The board shall submit to the commission a report of the causes of the pool's insufficiency, the assessments necessary to replenish it and the steps taken to prevent a recurrence of such circumstances.

Statutory Authority

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Regulation 30, Case No. INS870057, § 6, eff. September 1, 1987; amended, Virginia Register Volume 26, Issue 14, eff. March 1, 2010.

14VAC5-360-100. Distribution of surplus funds.

Any surplus accumulated within a pool's fiscal year, as determined from the annual audited financial report, may be declared refundable by the board. No distribution of the surplus funds shall be made earlier than 12 months following the end of the pool's fiscal year for which a surplus was declared. Such distribution shall not be made until certified by an actuary and the plan has been filed with the commission.

Surplus accumulated within a pool's fiscal year shall be used exclusively for the benefit of those members belonging to the pool during that year. The accounting for each pool's fiscal year shall be separate for each year.

Notwithstanding the foregoing paragraph, the commission may require, and shall permit upon application of the pool that does not write workers' compensation, an amount as the board may elect, of a pool's surplus accumulated within a fiscal year be allocated to a restricted surplus account at the end of that year. The restricted surplus is to be used at the direction of the pool's board subject to the approval of the commission.

However, for pools that have been merged into by a group self-insurance association consisting solely of political subdivisions licensed pursuant to § 65.2-802 of the Code of Virginia, the commission shall require that 1.0% or more of a pool's earned contributions for each fiscal accounting period be allocated to a contingency reserve. The contingency reserve is to be used at the direction of the pool's board subject to the approval of the commission. When the commission is satisfied that the contingency reserve is adequate for the needs of the pool, adjustments may be made by the commission as necessary to the contingency reserve or to contributions to the contingency reserve to maintain it at an established amount.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Regulation 30, Case No. INS870057, § 6, eff. September 1, 1987; amended, Virginia Register Volume 26, Issue 14, eff. March 1, 2010.

14VAC5-360-110. Member agreement.

A. Every member of a group self-insurance pool shall execute a member agreement which shall set forth the rights, privileges and obligations of the member, and the terms, coverages, limits, and deductibles of the plan. This agreement shall be subject to the approval of the commission and shall provide for, in substance, the following:

1. Election by pool members of a governing authority for the pool, a majority of whom shall be elected or appointed officials of pool members;

2. A requirement that the members' supervisory board designate and appoint an administrator empowered to accept service of process on behalf of the pool and authorized to act for and bind the pool and members in all transactions relating to or arising out of the operation of the pool;

3. The right of substitution of the administrator and revocation of the power of attorney and rights thereunder;

4. A financial plan or plan of risk management which is further described in 14VAC5-360-40 A 5;

5. A management plan which is further described in 14VAC5-360-40 A 6;

6. A requirement that the pool, at the request of a member, provide without unreasonable delay, to any person designated by the member, proof of the coverages provided by the pool, including any insurance or reinsurance, applicable deductible levels and the maximum liability which the pool will retain; and

7. For group life, accident and health coverages, a requirement that the pool provide to each covered pool member and to employees of pool members a certificate setting forth (i) the coverage, including any limitations, reductions and exclusions applicable to the coverage provided; (ii) to whom benefits are payable; and (iii) any family member or dependent's coverage.

Such member agreement may also contain such other provisions not inconsistent with law or this chapter.

B. The first page of the member agreement shall include a summary that shall disclose:

1. In regard to coverage:

a. The coverages provided;

b. The period of the coverage;

c. The amount of the deductible, if any, per claim or in the aggregate; and

d. For each coverage, the maximum amount of coverage to be borne by the pool.

2. In regard to the contribution:

a. The contribution and dates payments are due for the political subdivision to become a member of the pool;

b. The basis upon which each member's contribution is determined; and

c. Whether any additional assessments of the members may be made.

3. In regard to excess coverage of the pool:

a. A description of the excess coverage for the pool as to its coverage per occurrence, coverage per occurrence per person, if appropriate, and in the aggregate for each coverage offered; and

b. A statement that there is no excess coverage for the pool if the pool has not obtained such coverage.

4. The name of the proposed service agent.

C. The member agreement shall include a prominent disclosure notice that must be signed by a duly authorized officer of the political subdivision. The disclosure notice shall use the following or substantially similar language:

A local government group self-insurance pool is not protected by any Virginia insurance guaranty association against default due to insolvency. In the event of insolvency, members and persons filing claims against members may be unable to collect any amount owed to them by the pool regardless of the terms of the member agreement. In the event the pool is in a deficit position, a member may be liable for any and all unpaid claims against such member.

With regards to workers' compensation liability, each member agrees to assume and discharge, jointly and severally, any liability under the Virginia Workers' Compensation Act of any and all employers party to such agreement and which provides that, in addition to the rights of the pool, in the event of failure of the pool to enforce such rights after reasonable notice to the pool, the commission shall have the right independently to enforce on behalf of the pool the joint and several liability of its members under the Virginia Workers' Compensation Act and the liability of members for any unpaid contributions and assessments.

The member agreement may also contain such other provisions not inconsistent with law or this chapter.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Regulation 30, Case No. INS870057, § 6, eff. September 1, 1987; amended, Virginia Register Volume 26, Issue 14, eff. March 1, 2010.

14VAC5-360-120. Servicing of pool.

A. A service agent for a licensed group self-insurance pool shall apply for and shall be subject to the approval of the commission before entering into a contract with a pool and shall satisfy to the commission that it has adequate facilities and competent personnel to fulfill its obligations to the pool and this chapter.

B. A service agent shall maintain a resident agent in this Commonwealth and that agent shall be authorized to act for the service agent on any and all matters covered by the service agreement. All books and records relating to the servicing of the pool shall be maintained in Virginia.

C. A service agent shall file with the commission copies of all contracts entered into with the pool as they relate to the services to be performed. The service contract must state that the service agent agrees to handle all claims covered by the service agreement incurred during the contract period to their conclusion without additional compensation unless an alternative compensation methodology is approved by the commission. Approval to transfer claims from one service agent to another must be obtained from the commission prior to such transfer.

D. The service agent shall furnish a fidelity bond covering its employees in an amount sufficient to protect all monies placed in the claims fund.

E. Upon satisfactory compliance with the above provisions, a certificate of approval as a recognized and authorized service agent shall be issued to the applicant. Failure to comply with any of the foregoing rules or any order of the commission within the time prescribed shall be considered justification for withdrawing the certificate of approval. The commission shall give 10 days prior notice of such withdrawal. The notice shall be served personally, or by certified or registered mail, upon all interested parties setting forth the reasons for withdrawal, and providing the service agent an opportunity to introduce evidence and be heard. If, after a hearing, which may be formal or informal, the service agent's certificate of approval is revoked this revocation shall become effective 30 days after issuance of the commission's order or within such shorter or longer period as the commission may consider necessary to protect the interests of the pool, its members and their employees.

F. Each individual, partnership, corporation or other entity approved to act as a service agent for a pool may be required to file with the commission an annual statement of financial condition within four months of the completion of its fiscal year.

G. The pool may through its own personnel provide the services performed by a service agent upon approval by the commission.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Regulation 30, Case No. INS870057, § 6, eff. September 1, 1987; amended, Virginia Register Volume 26, Issue 14, eff. March 1, 2010.

14VAC5-360-130. Handling of pool deficit.

If a group self-insurance pool is in a deficit condition, the pool shall promptly file with the commission a financial plan to correct the deficit condition. If the plan is found to be unacceptable by the commission and written notice, thereof, is given to the governing authority of the pool, delinquency proceedings may be commenced and conducted by the commission in accordance with the provisions of Chapter 15 (§ 38.2-1500 et seq.) of Title 38.2 of the Code of Virginia.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Regulation 30, Case No. INS870057, § 6, eff. September 1, 1987; amended, Virginia Register Volume 26, Issue 14, eff. March 1, 2010.

14VAC5-360-140. Termination of pool members.

A. A member who fails to make timely contribution payments as provided by the board may be terminated after 10 days written notice has been given to the member and the commission. A member can be terminated without cause after 30 days written notice has been given to the member.

B. For workers' compensation liability, no member agreement shall be cancelled or nonrenewed except on 30 days notice to the member and the Workers' Compensation Commission, unless the member has obtained other insurance and the Workers' Compensation Commission is notified of that fact by the insurer assuming the risk, or unless, in the event of cancellation, said cancellation is for nonpayment of contributions; then 10 days notice shall be given the member and the Workers' Compensation Commission.

C. The pool shall remain liable for all claims applicable to the period during which the political subdivision was a member of the pool, including the period required for termination of membership.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Regulation 30, Case No. INS870057, § 6, eff. September 1, 1987; amended, Virginia Register Volume 26, Issue 14, eff. March 1, 2010.

14VAC5-360-150. Terms of license; voluntary dissolution of pool; mergers.

A. A pool's license shall remain in effect until terminated at the request of the board or revoked by the commission pursuant to 14VAC5-360-160.

B. Before a pool can voluntarily dissolve, it must present a plan of dissolution to the commission for approval. Such a plan shall provide for the payment of all incurred losses and expenses of the fund and its members, including all incurred but not reported losses, as certified by an actuary, to the extent of the pool's assets. No assets of the pool may be used for any other purpose until payment of all such losses and expenses is provided for.

C. Subject to the approval of the commission, a pool may merge with another local government group self-insurance pool if the resulting pool assumes in full all obligations of the merging pools. The commission may hold a hearing on the merger and shall do so if any party, including a member of either pool, so requests.

D. Subject to the approval of the commission, a group self-insurance association consisting solely of political subdivisions licensed pursuant to § 65.2-802 of the Code of Virginia may merge with a pool pursuant to § 15.2-2703 of the Code of Virginia if the resulting pool assumes in full all obligations of the group self-insurance association. The commission may hold a hearing on the merger and shall do so if any party, including a member of the group self-insurance association or pool, so requests.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Regulation 30, Case No. INS870057, § 6, eff. September 1, 1987; amended, Virginia Register Volume 26, Issue 14, eff. March 1, 2010.

14VAC5-360-160. Revocation or suspension of self-insurance license.

A. The commission may suspend or withdraw a pool's license as provided for in 14VAC5-360-30 B.

B. The commission shall give 10 days prior notice to a pool of the proposed suspension or revocation. The notice shall be served personally, or by certified or registered mail, upon all interested parties and shall state the reasons for the proposed suspension or revocation and provide the pool with an opportunity to introduce evidence and be heard. If after a hearing, which may be formal or informal, the pool's license is suspended or revoked, such action shall become effective 30 days after the commission's order is issued.

C. Any suspension may be terminated by the commission upon proof by the pool that the original reasons for suspension have been satisfactorily corrected, and that the pool continues to meet all other requirements for a license.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Regulation 30, Case No. INS870057, § 6, eff. September 1, 1987; amended, Virginia Register Volume 26, Issue 14, eff. March 1, 2010.

14VAC5-360-170. Application of Unfair Trade Practices Act; Insurance Information and Privacy Protection Act.

A group self-insurance pool shall be subject to the provisions of Chapter 5 (§ 38.2-500 et seq.), Unfair Trade Practices, and Chapter 6 (§ 38.2-600 et seq.), Insurance Information and Privacy Protection, of Title 38.2 of the Code of Virginia.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Regulation 30, Case No. INS870057, § 18, eff. September 1, 1987.

14VAC5-360-180. Penalties.

Penalties for failure to comply with this chapter may include (i) suspension or revocation of the pool's license as provided in 14VAC5-360-160, or (ii) a monetary fine of not more than $5,000, or (iii) both.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Regulation 30, Case No. INS870057, § 6, eff. September 1, 1987; amended, Virginia Register Volume 26, Issue 14, eff. March 1, 2010.

14VAC5-360-190. Severability.

If any provision of this chapter or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the chapter and the application of the provision to other persons or circumstances shall not be affected thereby.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.

Historical Notes

Derived from Regulation 30, Case No. INS870057, § 6, eff. September 1, 1987; amended, Virginia Register Volume 26, Issue 14, eff. March 1, 2010.



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